An insurer wants to spin off its asset management arm.
Phoenix Companies Inc., Hartford, says it plans to distribute the stock of Phoenix Investment Partners to Phoenix shareholders and turn the unit into a stand-alone public company run by current president of the unit, George Aylward.
Phoenix Investment Partners generated $3.6 million in net income in 2007 on $215 million in revenue and $40 billion in assets under management.
Phoenix hopes to complete the spin-off by Sept. 30.
Phoenix intends to keep Goodwin Capital Advisers Inc, a division of Phoenix Investment Partners that manages general account assets for Phoenix.
The asset management unit spin-off announcement comes less than 2 weeks after Oliver Press Partners L.L.C., New York, an investment management firm, announced that it was starting a proxy fight in an effort to name 3 directors to the Phoenix board and force Phoenix to implement a variety of changes including the sale of the company’s non-insurance business.
Oliver Press also recommended that Phoenix cut compensation costs, review other costs and find ways to redeploy capital from its closed block of life insurance policies.
Phoenix Chairman Dona Young says Phoenix is turning the asset management unit into a stand-alone company partly because 5 years of efforts to rebuild the business have given Phoenix more options.
“Separation will increase clarity on valuation for the respective businesses and serve the best long-term interests of both companies,” Young says in a statement about the spin-off proposal.
After the spin-off, Phoenix would be a “pure play” life and annuity company focused on serving affluent and high-net-worth clients, Young says.
Young notes in the statement that Phoenix does have access to closed-block capital that “can be redeployed into higher return opportunities.”
Oliver Press put out a statement welcoming the announcement of the proposed asset management unit spin-off.
“We are gratified that the views of leading shareholders have finally convinced the Phoenix board to pursue the first step in our value recovery plan,” Oliver Press says in a letter to Phoenix shareholders. “We are convinced that with the unsuccessful diversion into asset management now out of the way, the opportunity is at hand to correct the core issues that have resulted in the declining ratings and low [return on equity] of this company — inefficient capital allocation in the closed book, and excessive cost and overhead structure.”
The proposed spin-off would make the Phoenix insurance and asset management operations “cleaner acquisition targets,” Andrew Kligerman, a securities analyst at UBS Investment Research, New York, writes in a comment on the spin-off announcement.