Closed life and pension fund consolidator Phoenix Group Holdings plc, owner of the “old” Standard Life Assurance, announced it posted record cash generation of £950 million in the first half of 2022, up from £872 million in H1 of 2021.
The company said it is now confident of delivering annual cash generation at the top end of the £1.3 billion-£1.4 billion target range for FY 2022. It raised its interim dividend 3% to 24.8p per share.
Phoenix said it has retained its strong solvency balance sheet, with a S2 surplus of £4.7 billion — down from £5.3 billion in H1 2021 after the repayment of £450m of debt — and a shareholder capital coverage ratio of 186%, above the top-end of its 140%-180% range.
The group said this provides it “with significant capital to reinvest into both organic and inorganic opportunities.”
Phoenix reported record new business long-term cash generation of £430 million, more than double the H1 2021 of £206 million.
This comprised £282 million from Bulk Purchase Annuities and £148 million from its capital-light fee-based businesses (H1 2021 – £80m and £126m).
Phoenix reported first-half operating profit of £507 million (HY 2021: £527 million) but said it is reporting a statutory loss after tax of £876 million.
“This primarily reflects £(1,076) million of adverse investment return variances in relation to our hedging instruments,” said Phoenix.
“As a reminder, our hedging approach is designed to stabilise our SII Surplus and long-term free cash, which in turn protects our dividend capacity, but this does cause significant IFRS volatility due to a mismatch between our IFRS balance sheet, and the Solvency balance sheet which we are hedging.
“However, we accept this as the trade-off to deliver the resilient cash generation and dividend that Phoenix is known for.”
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.
“The Bulk Purchase Annuity (BPA) team has again delivered in the first half of the year with £1.6bn of premiums contracted, growing our presence in this highly competitive market, while our Workplace pensions business demonstrates excellent momentum acquiring 42 new scheme wins, with a healthy pipeline in place.
“We also extended our workplace product range to include an ISA for scheme members.
“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.
“We have also begun moving over 1.5 million pension customers to sustainable investment solutions and when the exercise completes later this year, we will have switched £15 billion in assets under management, underpinning our role in supporting our group’s commitment to sustainable focused investing.
“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.”
Phoenix Group CEO 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.
“We have delivered strong cash generation of £950 million and maintained our resilient balance sheet. We have also delivered both organic growth, with £430 million of new business from our Open business, and inorganic growth, with the announcement of our £248 million acquisition of Sun Life of Canada UK.
“Our 2022 Interim dividend has increased 3% year-on-year, and we have proposed a further 2.5% increase at our 2022 Final dividend to reflect the value we expect to create with the Sun Life of Canada UK acquisition.
“We have been working tirelessly to ensure we can support our customers and colleagues impacted by the increased cost of living – building on our programme of activities for our most vulnerable customers and offering a range of support to our colleagues including a one-off payment.
“As the UK’s largest long-term savings and retirement business, we are driven by our core social purpose.”