1. MONEY
12
CLEARLY VULTURE FUNDS FEEL
THERE IS LIMITED SANCTION IN
THE LAW AS IT CURRENTLY STANDS
Michael McGrath, Fianna Fail
Lender Rate 1 Monthly
payment
Contact
Bank of Ireland 7.50%2 €398.42 0818 200 334
Ulster Bank 7.90% €401.97 1800 51 52 53
KBC Bank 9.80%2 €418.96 1800 51 52 53
AIB Bank 9.99% €420.56 1890 724 724
1 Based on €20,000 borrowed over five years
²Current account customers only
THE BEST LOANS
Institution ATM fee POS 1fee Quarterly fee
Ulster Bank €0.00 €0.00 €12.00
Permanent TSB €0.00 €0.00 €12.00
KBCBank €0.30 €0.00 €6.00
Bank of Ireland €0.25 €0.10 €5.00
AIBBank €0.35 €0.20 €4.50
1Point-of-sale or debit card purchases
CURRENT ACCOUNTS
Company Fuel Av. Annual Bill¹
Energia Electricity only €967
Flogas Gas only €782
Energia Dual fuel €1,795
¹Online billing and payment by direct debit required. Prices are based on average annual use of
13,800kWh gas, 5,300kWh electricity Source:Bonkers.ie
HOME ENERGY
BEST FIXED RATES — MOVERS/SWITCHERS
Institution Rate Term Contact
KBC Bank 3.25%1,2 2 years 1800 51 52 53
Ulster Bank 3.20%2,3,4 3 years 1800 303 004
Bank of Ireland 3.45%3 5 years 0818 200 339
Ulster Bank 3.60%1 7 years 1800 303 004
140% deposit 2Current account customers only 320% deposit 4Min €250,000
BEST FIXED RATES — FIRST-TIME BUYERS
Institution Rate Term Contact
AIB Bank 3.60%1 2 years 1890 724 724
AIB Bank 3.65%1 3 years 1890 724 724
Bank of Ireland 3.75%1 5 years 0818 200 339
Ulster Bank 3.99%1 7 years 1800 303 004
110% deposit
BEST VARIABLE RATES — MOVERS/SWITCHERS
Institution Rate Deposit Contact
KBC Bank 3.20%1 50% 1800 51 52 53
EBS 3.30% 50% 1850 654321
AIB Bank 3.35% 50% 1890 724 724
Ulster Bank 3.35%2 20% 1800 303 004
1New customers only with KBC current accounts 2Min €250,000
BEST VARIABLE RATES — FIRST-TIME BUYERS
Institution Rate Deposit Contact
KBC Bank 3.65%1 10% 1800 51 52 53
EBS 3.70% 10% 1850 654321
AIB Bank 3.75% 10% 1890 724 724
1
New customers only with KBC current accounts
MORTGAGES
TOP HEALTHINSURANCEPLANS
Insurer Plan Monthly
cost
Contact
Public hospitals — basic cover
GloHealth Base Lite €32.831 1890 781 781
Aviva Select Starter €35.42 1890 717 717
Laya Assure Protect €35.96 1890 700 890
Private hospitals — corporate plans costing about €1,400
GloHealth Best Select Max Cash €116.672 1890 781 781
Aviva Be Fit 3 €119.212 1890 717 717
Laya Complete Simplicity €123.062 1890 700 890
1No direct settlement on this plan 2Includes cover for day-to-day medical expenses. Prices are for
individual adults and reflect changes to tax relief. Laya rates include a 3% charge for monthly
payments Source: TotalHealthCover.ie
HEALTH INSURANCE
BESTBALANCETRANSFERS
Card Disc Rate Until Contact
Bank of Ireland 0.00% 7 months 0818 200 334
KBC Bank 0.00% 6 months 1800 51 52 53
Tesco 0.00% 6 months 1800 555 743
BESTSTANDARDRATES
Card Rate Interest free Contact
AIBClick 13.60% 1 56 days aib.ie
KBC Bank 18.25% 56 days 1800 51 52 53
Tesco 19.10% 56 days 1800 555 743
1AIBinternet banking customers only 2Annual fee of €76.18 Source:Bonkers.ie
CREDIT CARDS
Best Buys
Credit card use is decreasing, with the Central Bank reporting
a drop in the number of cards and the amount owed on them.
The downward trend is due to the departure of credit card
specialist MBNA, according to the Central Bank, and a move by
other issuers to cancel inactive accounts.
It is also likely that many credit card users have switched to
debit cards instead, especially after the banks replaced the
domestic Laser card system in 2014 with internationally
accepted Visa and MasterCard cards. The government imposes
€30 stamp duty on credit card accounts, while a tax on debit
cards was scrapped at the start of 2016.
We identify the best options for the 1.4m people who still
have a credit card.
BEST FOR BORROWING?
Credit cards are never a good choice for borrowing, even
for short-term needs, because interest rates are so high.
The lowest is 13.6% interest on the Click credit card from Allied
Irish Banks. AIB also has the highest rate — 22.7% for
purchases with its Be card.
Bank of Ireland has a useful feature that cuts the cost of
credit on individual purchases of more than €500. You can ask
to transfer the debt to an instalment plan, paying it off over
12 months at a lower interest rate of 6.9%.
BEST FOR NEW CUSTOMERS?
Balance transfer deals give new customers a chance to
stop digging themselves deeper into debt when they
transfer a balance to another credit card provider. Bank of
Ireland, Permanent TSB, KBC Bank and Tesco Personal Finance
give 0% interest on balance transfers, allowing you to pay off
what you owe interest-free over six or seven months. Allied
Irish Banks and Ulster Bank charge less than 4% interest on
balance transfers for up to a year.
You have to be disciplined, though, by cutting up your new
card as soon as it arrives. Otherwise, any payments you make
will be set against new purchases rather than reducing the
transferred balance. The danger is this balance might not be
paid off before the interest reverts to the standard rate of
20% or more.
BEST FOR PERKS?
AIB’s Platinum card pays a 0.5% rebate on spending of
€5,000-€50,000 a year, with a maximum cashback of
€225 a year. You must earn at least €40,000 a year.
KBC Bank also pays cashback at a rate of 1% but only on
purchases made at grocery shops and online, with rebates
capped at €120 a year.
Bank of Ireland’s Platinum Advantage card, which has an
annual fee of €76.18, gives travel insurance at no extra cost
when the card is used to pay for at least half of the cost of
a trip. Tesco’s Clubcard credit card offers discounts on
shopping. Customers earn one loyalty point for every €2
purchase on the card, or two points for every €2 spent in
Tesco supermarkets.
BEST FOR TRAVELLERS?
Currency conversion charges can add up when using your
credit card in Britain, America or anywhere else outside
of the eurozone.
Permanent TSB and Tesco have the lowest charge — 1.75%.
Ulster Bank and KBC charge 2%. Bank of Ireland charges
2.25%, and AIB charges up to 2.75% of purchases made with
Visa cards outside Europe.
TOP TIP
It is tempting to dump a credit card if you use the credit
facility, and replace it with a debit card. It can be difficult
to travel without a credit card, however, because car hire
companies and even hotels might refuse your business if you
do not have one.
NIALL BRADY
MONEYMADEEASY
YOURFIVEMINUTEGUIDETO...
CREDIT CARDS
SAVINGS
EASY ACCESS
Institution Rate Min deposit Contact
RaboDirect 1.00% 1 €1 rabodirect.ie
KBC Bank 0.85% 2 €3,000 1800 51 52 53
Nationwide UK 0.76% 3 €2,000 1800 800 310
10.5% over €50,000 20.3% over €100,000 3Six free withdrawals
NOTICE ACCOUNTS
Institution Rate Notice Contact
Leeds Building Soc 1.00% 1 30 days 01 661 7938
RaboDirect 0.95% 2 90 days rabodirect.ie
RaboDirect 0.85% 2 30 days rabodirect.ie
1Min €2,500 2Min €1
DIRTFREE
Institution Rate Term Contact
State Savings 2.26% 10 years 1850 30 50 60
State Savings 1.24% 5.5 years 1850 30 50 60
State Savings 0.99% 4 years 1850 30 50 60
FIXED RATES
Institution
Annual
Rate
Term Contact
KBC Bank 1.35% 1,2 12 months 1800 51 52 53
KBC Bank 1.10% 1 14 months 1800 51 52 53
Nationwide UK 0.80% 1 24 months 1800 800 310
1Min €3,000 2
Current account customers only
MONTHLY SAVERS
Institution Rate Max monthly Contact
KBC Bank 4.00% €1,000 1800 51 52 53
Nationwide UK 3.00% €1,000 1800 800 310
EBS 3.00% €1,000 1850 654321
I
n today’s climate of very low interest
rates, an investment that produces an
income of close to 6% per annum
looks like a treasure, but is it fool’s
gold?That’sthequestionforoneofmy
largest investments, Phoenix Group
Holdings. It accounted for more than 15%
of my portfolio at the end of last year and
delivered a total return (dividends plus
capital gains) of almost 23% in 2015.
Phoenix is a life assurance holding
company with an unusual business
model. It doesn’t actively sell insurance
policies. Instead, it buys life assurance
companiesthatareclosedtonewbusiness
and administers them until the final poli-
cies are claimed, which could be 50 years
from now or even longer. Its Irish
customers include people who bought
policies from Scottish Provident many
years ago.
Phoenix’s main attraction is the divi-
dend of 53.4p (€0.68) a share, equivalent
to an annual yield of 5.9% at the current
share price of £9.10. A dividend of close to
6% is very attractive, but only if it can be
maintained. My first job therefore is to
check if the dividend is safe.
The company’s main source of cash to
paydividendsisthemoneyitreceivesfrom
the underlyinginsurance businesses.Cash
emerges from those businesses as policies
go off the books; this allows the release of
safety margins in reserves. The business
has been a cash cow: dividends increased
by more than 25% between 2011 and 2014,
and debt fell from 63% of gross book value
in2009to34%in2014.“Normal”business
generated net cash of three times the cost
ofthedividendin2014;thesaleofthenon-
core asset management business added
almost as much again.
DIARYOFAPRIVATE
INVESTOR
Results for 2015 have yet to be pub-
lished. Looking at projected cash flows, I
estimatethatreceiptsfromtheunderlying
businesses,netofexpensesandintereston
borrowings, will be more than twice the
costofthedividendeachyearfrom2016to
2019, and will remain strong thereafter.
Assuming everything goes to plan, cash
flows over the next five years at least will
bemorethansufficientforscheduleddebt
repayments and dividends at the current
level. A large chunk of debt is due for
repayment in 2019. There should be
enough cash on the balance sheet to meet
the repayment; alternatively the money
could be borrowed in the market, given
the strong balance sheet position. There-
fore, the conclusion is that the dividend is
safe for the foreseeable future. Main-
tainingahighdividendisnouseifiterodes
book value. That hasn’t happened in the
past: despite the high dividend, book
value per share increased from £10.58 at
end 2013 to £11.43 by mid-2015, but the
run-off nature of the business means that
Phoenix cannot defy gravity forever. Bar-
ring further acquisitions, its book value
must eventually fall as policies go off. But
the strong balance sheet means that
acquisitions are not barred: they are very
muchontheagenda.Acquisitions—atthe
right price — would boost the company’s
bookvalue.Phoenixmissedoutonamas-
sive acquisition opportunity towards the
end of 2015. The company involved went
for a price well in excess of book value,
which was considerably more than
Phoenix was prepared to pay. As a share-
holder, I admire the directors’ discipline
in not overpaying, but I am slightly con-
cerned that they may not exercise the
same discipline in future.
Phoenix’s current share price is just
80% of book value. The fact that a com-
pany operating in a similar space was
Phoenix Group Holdings is a sound long-term investment but may find it difficult to repeat its impressive returns of recent years
Why I’m cooling on flaming-hot Phoenix
An impressive 6%
annual income
from a life assurance
holding company
has been the
mainstay of my
portfolio. But it
can’t last for ever recently sold for well in excess of 100% of
bookvaluemeansthatPhoenixcoulditself
become a takeover target — and at a price
well north of the current share price. Any
thoughts of windfall profits from a take-
over must be tempered, however, by the
knowledge that book value is an arcane
concept in life assurance. We are dealing
withstocksofinsurancepoliciesthatcould
stay on the shelves for decades, not bars of
soaporpacketsofcornflakesthatareeasily
valuedandwillbesoldforcashwithindays
orweeks.Itdoesn’tnecessarilyfollowthat
Phoenix will become a takeover target.
Nevertheless,thefactthatthesharepriceis
at a discount to book value provides some
upside potential.
As always, there are risks. Recent
market volatility will have affected the
values of Phoenix’s insurance businesses,
butthankfullynotbymuch.Iestimatethat
a 10% fall in equity and property values
would cause only a 4% fall in book value.
Other factors, for example an unantici-
pated increase in longevity or a widening
of credit spreads, could have a bigger
impact. Another risk is that regulators
could ask insurers to do more to compen-
sate customers for past failings. Sterling
could also fall further against the euro, but
I have hedged that risk.
All things considered, I believe that
Phoenix may not be an untarnished pot of
gold, but it is a sound long-term invest-
ment. Nevertheless, I recognise the risks
associatedwithahighlevelofexposuretoa
singleasset,soIamreducingmyholdingto
closer to 10% of my total portfolio.
Colm Fagan is an active private investor.
He is a retired actuary and a non-execu-
tive director of a number of financial
institutions. The purpose of this column is
to demystify the world of stocks and shares
by recounting one person’s adventures
in this world. It does not purport to
give advice
COLM
FAGAN
MARKET VOLATILITY WILL
HAVE AFFECTED THE
VALUES OF PHOENIX’S
BUSINESSES, BUT
THANKFULLY NOT MUCH