Phoenix Group sees good growth after Standard Life Assurance acquisition

Life and pensions consolidator Phoenix Group announced a “strong” 2018 year-to-date in a trading update on Thursday, as its investors prepared for the company’s capital markets day.

The FTSE 250 firm reported £664m of cash generation in 2018, up from £653m, making for total group cash generation of £1.3bn in 2017 and 2018, exceeding the upper end of its cash generation target of between £1bn and £1.2bn for the period.

Its Solvency II surplus was £3.1bn as at 30 September, up from a proforma £2.5bn as at 31 December.

Phoenix’s shareholder capital coverage ratio was 164% at the end of September, rising from a proforma 147% on 31 December.

It said it had already delivered £400m of capital synergies on the acquisition of the Standard Life Assurance business, against a total target of £440m announced for the transaction.

Assets under administration remained stable at £240bn on 30 September, the board said, which reportedly reflected net business inflows of £3.3bn by the end of the third quarter on open business in the UK and Europe.

Two further bulk purchase annuity transactions were completed during the second half, taking total 2018 year-to-date transactions to £0.8bn.

Phoenix said it had selected Diligenta, the FCA-regulated subsidiary of TCS, as its partner to deliver a single, digitally-enhanced outsourcer platform that it said would improve customer outcomes and deliver cost savings for its legacy Phoenix Life policies, which was due to be complete by end 2021.

Fitch Ratings affirmed the group's ratings in July at A+5 with a ‘stable’ outlook.

Phoenix said its leverage ratio was currently 22%, below the Fitch target range of 25-30%.

“The trading update we have announced today demonstrates Phoenix's strength in delivering and ability to exceed our targets,” said group chief executive officer Clive Bannister.

“We have delivered £1.3bn of cash generation in 2017 and 2018, exceeding the upper end of our target range of £1.0 - £1.2bn and have significantly strengthened our Solvency II surplus position during the year to a group surplus of £3.1bn as at 30 September.”

Bannister said Phoenix was continuing to deliver against its strategy, with a further two bulk purchase annuity transactions completed in the second half of the year.

Operationally, he noted that Diligenta was becoming its preferred outsource partner, enabling the company to deliver a single, digitally enhanced outsourcer platform to around 5.5 million of its customers.

“The acquisition of Standard Life Assurance completed on 31 August, and was transformational for Phoenix.

“I am delighted by the significant progress we have already made with the transition process and the £400m of capital synergies delivered.

“I look forward to explaining how Phoenix has been re-defined by this acquisition at today's capital markets day.”