Phoenix: Insurer hikes dividend after volatile markets hit investments and share price
British insurer Phoenix Group today posted a £1.23bn loss as volatile markets hit the value of the insurance company’s investment portfolio.
Shares in the FTSE 100 company fell sharply on the news as Phoenix pointed to the “challenging economic backdrop” after noting it generated 12.5 per cent less cash than in 2021
The insurer, however, upped its dividend as it successfully achieved its own cash generation targets and benefited from its acquisition of Sun Life UK.
The FTSE 100 firm outstripped the cash generation targets it previously set itself, in generating £1.504bn in cash over 2022. This saw Phoenix exceed its aim to generate £1.3bn- £1.4bn worth of cash each year.
The insurer, in turn, upped its dividend by five per cent, to 50.8p, in line with its pledges to continuously grow its shareholder payouts .
The insurer’s “strong” cash generation came as it successfully capitalised on the continuing pensions buyout boom in completing a series of bulk purchase annuity (BPA) deals.
Phoenix chief executive Andy Briggs said: “Phoenix has a simple strategy that is focused on the UK long-term savings and retirement market.”
Phoenix’ dividend hike, however, came as the insurer posted a £1.23bn IFRS loss after tax on its balance sheet, as volatile markets hit the value of its investments.
Speaking to City PM, Phoenix chief financial officer Rakesh Thakrar explained that rising interest rates hit the value of the insurer’s bond holdings, causing its investment portfolio to plummet.
The market turbulence saw the value of the assets it manages plummet by £46bn, from £310bn in 2021 to £259bn in 2022.
Phoenix, however, grew its business at record levels, in posting new business growth of £1.233bn, as it successfully capitalised on the pensions buyout boom.
Bulk purchase annuity (BPA) deals, which see specialist insurers take over defined benefit (DB) pensions schemes, accounted for around £900m worth of Phoenix’s £1.233bn growth.
Thakrar said the pensions buyout market is “growing” as he noted many pensions schemes are now increasingly “well funded” meaning they increasingly have the ability to de-risk themselves.
Phoenix’s growth came as the FTSE 100 company acquired the British arm Canadian life insurer Sun Life UK for £248m in cash in August 2022, in a deal that allowed it to up its dividend by 2.5 per cent.
This growth saw Phoenix post operating profits of £1.245bn in 2022, a sum one per cent higher than in 2021.
Phoenix’s growth came as the insurer successfully capitalised on the pensions buyout market, in carrying out £4.8bn worth of bulk purchase annuity (BPA) deals in 2022.
However, the £4.8bn worth of BPA deals marked a 14 per cent drop on the £5.6bn worth of pensions buyout deals Phoenix completed in 2021.
Shares in Phoenix group are currently down 2.88 per cent.