Phoenix smashes City forecasts as it doubles long-term cash generation on annuities growth
Pensions giant Phoenix sailed past analysts’ estimates today as it more than doubled its long-term cash generation in the first six months of the year despite a “challenging market environment”.
In its half-year report today, Phoenix said its new business long-term cash generation, a key measure of future profitability, jumped 106 per cent to £885m from £430m on the back of strong growth through its workplace and bulk purchase annuities businesses.
Total cash generation in the six months dipped to £898m from £950m in the same period last year but the numbers topped the City’s predictions. Analysts had been pricing in long-term new business cash generation of just £519m for the period, according to a company-compiled consensus.
Flows into its funds rocketed 72 per cent to £3.1bn, with the firm now on track to post net positive fund flows across the business for the first time in its history.
Phoenix chief Andy Briggs said the firm had seen strong organic growth in the period and was now on track to hit the top end of its £1.3-£1.4bn guidance for the year.
Through its Standard Life brand, Phoenix has also been ramping up its activity in bulk annuities — where insurance firms buy company-defined benefits, or final salary and pension schemes — as demand for corporate pension insurance deals grows.
In an interview with City PM Briggs added that the firm was eyeing up more activity after a boom in the market over the past two years.
“We’re prepared to deploy around the £300m capital against the [bulk purchase annuities] market each year and what we’re looking to do is sweat that capital harder, to bring our new business strain lower, so we can write more business and generate more value,” he said in an interview.
Phoenix said today it was also looking to strike more M&A deals in the second half of the year after it snapped up the pensions business of Sun Life in April.
Briggs said Phoenix had seen already seen a boost from the Sun Life deal and was the potential for more dealmaking on the horizon.
“Retirement businesses will be the focus — historically to be more focused on closed books but we absolutely wouldn’t rule out open book [deals] as well, and we would be interested in both larger and smaller,” he told City PM