Record results

Phoenix unveils record cash and £1bn war chest

Standard Life house
Phoenix owns the Standard Life brand

Long term savings group Phoenix is forecasting cash generation to hit the top end of forecasts and says it has a £1 billion acquisition war chest.

The FTSE 100 company, which owns the Standard Life brand, said it delivered on all its key objectives in the first half, generating a record £950 million of cash, up £78m on the same time last year.

It said it is confident of delivering at the top end of the £1.3bn-£1.4bn target range for the full year.

The growth in cash generation was underpinned by record new client business of £430million, with the most significant contribution originating from its retirement solutions business, which benefited from six bulk purchase annuity (BPA) contracts.

The group generated a slightly reduced operating profit of £507m (HY 2021: £527m) because of a drop in earnings within its heritage arm and higher investment in its open business.

Its balance sheet was strengthened by repaying £450million of debt, boosting its solvency ratio.

Chief executive Andy Briggs said: “Phoenix has performed very strongly in the first half of the year despite the challenging macro environment.

“We have once again delivered a record set of financial results, which was underpinned by the strong progress we have made across our strategic priorities.”

Last week the company announced that it had agreed to buy Sun Life of Canada’s UK division for £248m, its first ever cash-funded acquisition. Mr Briggs told the Reuters news agency that the business could spend more than £1 billion on similar deals.

Andy Curran, CEO of Standard Life, part of Phoenix Group, said: “Phoenix Group has once again delivered a record set of results in the first six months of 2022 – supported by the growth in our Standard Life business.

“We’ve embarked on building stronger relationships with financial advisers. We are investing further in our digital estate and are improving the competitiveness of our flagship personal pension.

Follow Daily Business on Linke

“We continue to invest in our Standard Life brand, leveraging its strength and heritage and despite the uncertain economic environment, remain confident that our business is well placed to deliver attractive, sustainable growth for Phoenix Group.”

AJ Bell financial analyst, Danni Hewson, said: “Life insurance group Phoenix may be boring but as record first-half results prove, boring can be beautiful, particularly amid the current turmoil.

“Managing life insurance products which are no longer being actively marketed to customers helps deliver a decent flow of cash and underpins the company’s generous dividends.”

The group’s Bulk Purchase Annuity (BPA) team posted £1.6bn of premiums contracted, growing its presence in a highly competitive market, while its workplace pensions business acquired 42 scheme wins, with a healthy pipeline in place. The company also extended its workplace product range to include an ISA for scheme members.

It has begun moving more than 1.5 million pension customers to sustainable investment solutions and when complete later this year, this will account for £15 billion in assets under management.

First half new business long-term cash generation came in at £430m, more than double H1 2021 at £206m.

The board has declared an Interim dividend of 24.8p per share, equal to the 2021 final dividend, which is an increase of 3% year-on-year (H1 2021: 24.1p per share).

Ahead of the 2022 FY results, the board said it will assess if organic business growth can fund a further sustainable dividend increase, in addition to the 2.5% inorganic dividend increase proposed for the Sun Life of Canada UK acquisition.

Assets under administration decreased to £269bn as at 30 June 2022 (FY 2021: £310bn) due to £38bn of adverse market movements, however the company’s hedging approach protects its fee income to deliver resilient cash generation.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.