Phoenix Group Holdings plc operates in the long-term savings and retirement business in Europe. The company operates through four segments: UK Heritage, UK Open, Europe, and Management Services. It provides a range of pensions and savings products to support people across various stages of the savings life cycle. The company manages Heritage in-force life and pensions policies; and offers and manages long term savings and pensions products. Its products include with-profits and unit-linked funds, and annuities; and workplace pensions, and individual savings and retirement solutions. The company serves individuals, corporates, and employers. It has a strategic partnership with abrdn plc, TCS, and HSBC. Phoenix Group Holdings plc was founded in 1782 and is based in London, the United Kingdom.
Risks
As with any investment, investing in Phoenix Group Holdings carries a level of risk. Overall, based on the Phoenix Group Holdings' adjusted beta (i.e. 2.12), the degree of risk associated with an investment in Phoenix Group Holdings is 'low'.
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'high' risk, it must have a beta value of 1.5 or more. Further information about the beta ratings can be found in the appendix section of this report.
The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the strong competition for its products and services from a growing list of established and new competitors (i.e. competition risk).
Appendix
Economic links to cash flow patterns
| Cash flow type | Introduction | Growth | Shake out | Mature | Decline |
|---|---|---|---|---|---|
| Operating | - | + | +/- | + | - |
| Investing | - | - | +/- | - | + |
| Financing | + | + | +/- | - | +/- |
Beta risk profile
| Beta value | Risk rating |
|---|---|
| 0 to 0.50 | Low |
| 0.50 to 1.50 | Medium |
| 1.50 to 3.00 | High |
| 3.00 and above | Extremely high |
Phoenix adjusted beta calculation
| Date | iShares MSCI World ETF unit price (USD) | Phoenix share price (GBP) | iShares MSCI World ETF unit price change (%) | Phoenix share price change (%) |
|---|---|---|---|---|
| 01/11/2019 | 96.76 | 745.50 | ||
| 01/12/2019 | 98.78 | 749.00 | 2.09% | 0.47% |
| 01/01/2020 | 97.73 | 758.00 | -1.06% | 1.20% |
| 01/02/2020 | 89.67 | 691.20 | -8.25% | -8.81% |
| 01/03/2020 | 77.93 | 626.60 | -13.09% | -9.35% |
| 01/04/2020 | 86.36 | 601.00 | 10.82% | -4.09% |
| 01/05/2020 | 90.70 | 616.20 | 5.03% | 2.53% |
| 01/06/2020 | 92.14 | 644.00 | 1.59% | 4.51% |
| 01/07/2020 | 96.65 | 658.60 | 4.89% | 2.27% |
| 01/08/2020 | 102.96 | 692.00 | 6.53% | 5.07% |
| 01/09/2020 | 99.52 | 688.20 | -3.34% | -0.55% |
| 01/10/2020 | 96.53 | 662.40 | -3.00% | -3.75% |
| 01/11/2020 | 108.94 | 716.80 | 12.86% | 8.21% |
| 01/12/2020 | 112.41 | 700.60 | 3.19% | -2.26% |
| 01/01/2021 | 111.49 | 674.80 | -0.82% | -3.68% |
| 01/02/2021 | 114.27 | 710.00 | 2.49% | 5.22% |
| 01/03/2021 | 118.49 | 734.20 | 3.69% | 3.41% |
| 01/04/2021 | 123.61 | 711.40 | 4.32% | -3.11% |
| 01/05/2021 | 125.60 | 735.60 | 1.61% | 3.40% |
| 01/06/2021 | 126.57 | 676.40 | 0.77% | -8.05% |
| 01/07/2021 | 128.83 | 679.40 | 1.79% | 0.44% |
| 01/08/2021 | 132.02 | 623.40 | 2.48% | -8.24% |
| 01/09/2021 | 126.46 | 645.60 | -4.21% | 3.56% |
| 01/10/2021 | 133.84 | 656.60 | 5.84% | 1.70% |
| 01/11/2021 | 131.10 | 640.20 | -2.05% | -2.50% |
| 01/12/2021 | 135.32 | 653.20 | 3.22% | 2.03% |
| 01/01/2022 | 128.32 | 660.20 | -5.17% | 1.07% |
| 01/02/2022 | 124.58 | 618.60 | -2.91% | -6.30% |
| 01/03/2022 | 128.16 | 614.00 | 2.87% | -0.74% |
| 01/04/2022 | 117.42 | 609.00 | -8.38% | -0.81% |
| 01/05/2022 | 117.94 | 637.60 | 0.44% | 4.70% |
| 01/06/2022 | 106.88 | 590.40 | -9.38% | -7.40% |
| 01/07/2022 | 115.57 | 643.80 | 8.13% | 9.04% |
| 01/08/2022 | 110.28 | 602.40 | -4.58% | -6.43% |
| 01/09/2022 | 99.95 | 526.80 | -9.37% | -12.55% |
| 01/10/2022 | 107.42 | 542.40 | 7.47% | 2.96% |
| 01/11/2022 | 115.44 | 588.80 | 7.47% | 8.55% |
| 01/12/2022 | 109.25 | 608.60 | -5.36% | 3.36% |
| 01/01/2023 | 117.01 | 640.80 | 7.10% | 5.29% |
| 01/02/2023 | 113.98 | 633.40 | -2.59% | -1.15% |
| 01/03/2023 | 117.67 | 546.40 | 3.24% | -13.74% |
| 01/04/2023 | 119.79 | 591.80 | 1.80% | 8.31% |
| 01/05/2023 | 118.60 | 552.40 | -0.99% | -6.66% |
| 01/06/2023 | 124.52 | 531.80 | 4.99% | -3.73% |
| 01/07/2023 | 128.54 | 550.20 | 3.23% | 3.46% |
| 01/08/2023 | 125.70 | 521.00 | -2.21% | -5.31% |
| 01/09/2023 | 120.17 | 482.20 | -4.40% | -7.45% |
| 01/10/2023 | 117.11 | 453.80 | -2.55% | -5.89% |
| 01/11/2023 | 127.78 | 465.20 | 9.11% | 2.51% |
| 01/12/2023 | 133.02 | 535.20 | 4.10% | 15.05% |
| 01/01/2024 | 134.20 | 505.40 | 0.89% | -5.57% |
| 01/02/2024 | 140.28 | 497.30 | 4.53% | -1.60% |
| 01/03/2024 | 144.91 | 552.60 | 3.30% | 11.12% |
| 01/04/2024 | 139.17 | 489.80 | -3.96% | -11.36% |
| 01/05/2024 | 145.71 | 496.20 | 4.70% | 1.31% |
| 01/06/2024 | 147.49 | 521.50 | 1.22% | 5.10% |
| 01/07/2024 | 149.97 | 547.00 | 1.68% | 4.89% |
| 01/08/2024 | 154.18 | 565.50 | 2.81% | 3.38% |
| 01/09/2024 | 156.91 | 559.50 | 1.77% | -1.06% |
| 01/10/2024 | 153.73 | 491.20 | -2.03% | -12.21% |
| 01/11/2024 | 160.13 | 492.00 | 4.16% | 0.16% |
| Beta | Adjusted beta | Comment(s) | |
|---|---|---|---|
| Consistent (monthly) intervals between data points | 0.73 | 0.82 | Here, when there is no valuation event, we have assumed that the share price is the same as the previous month, and, therefore, there has been no change in the share price. For example, there was no Phoenix valuation event in January 2022, so we have assumed that the valuation of Phoenix is the same in January 2022 as the previous month of December 2020 (at 9.25p), and, therefore, the share price change in January is 0%. |
| Inconsistent intervals between data points | 2.28 | 1.85 | Because there's only seven Phoenix valuation events, and, therefore, seven, available data points, calculating beta based on inconsistent intervals between data points seems to be the best approach. |