By Josh White
Date: Tuesday 05 Mar 2019
LONDON (ShareCast) - (Sharecast News) - Life and pensions consolidation company Phoenix Group announced a "strong" set of results for the year ended 31 December on Tuesday, with cash generation rising to £664m from £653m year-on-year.
The FTSE 250 company said it had delivered £1.3bn cash generation across 2017 and 2018, exceeding the upper end of its cash generation target range of between £1bn and £1.2bn for that period.
Its Solvency II surplus was £3.2bn as at 31 December, up from a proforma figure of £2.5bn at the end of 2017.
Phoenix Group's shareholder capital coverage ratio stood at 167% as at year-end, rising from 147%.
The board proposed a final dividend of 23.4p per share, which would be a 3.5% increase on the 2017 final distribution.
Group operating profit stood at £708m, surging from £368m year-on-year.
Assets under administration totalled £226bn at year-end, down slightly from the proforma £240bn reported at the end of 2017, with net business inflows standing at £3.9bn on UK open and European businesses.
New business contribution were £154m, which the board said demonstrated the value-accretive nature of open new business in the UK and Europe.
The directors noted Fitch Ratings' take on the group, at A+6 with a 'stable' outlook, and added that its leverage ratio was 22%.
Phoenix Group set out a new 2019 cash generation target of between £600m and £700m, and a long-term cash generation target for the 2019-2023 period of £3.8bn.
On the operational front, Phoenix Group highlighted that the acquisition of the Standard Life Assurance businesses was completed on 31 August, adding that its total synergy target net of the £150m transition costs had increased by £500m to £1.22bn from £720m.
It also laid out a new capital synergies target of £720m, up from £440m, with £500m delivered to date, as well as a new capitalised cost synergies target of £650m, up from £415m, which Phoenix Group said reflected an increase from £50m to £75m per annum.
The company said it was delivering on its strategic priorities, noting that it successfully entered the bulk purchase annuity market, contracting £0.8bn of liabilities in 2018.
It said the AXA and Abbey Life integrations had completed ahead of plan and targets, delivering cost synergy benefits of £27m per annum and cumulative cash generation of £968m.
Diligenta was selected as Phoenix's partner to deliver a single, digitally enhanced outsourcer platform to a further two million legacy-Phoenix policies, the board said.
It also confirmed that its Brexit preparations were "complete", and that its onshoring project was finalised with a UK plc in place.
"2018 was a very successful year for Phoenix in which we exceeded our cash generation targets, further improved our capital resilience and transformed the business through the acquisition of the Standard Life Assurance businesses," said group chief executive officer Clive Bannister.
"These results show the strength of our group and have enabled us to again increase our short and long term cash generation targets."
Bannister said the transition of the Standard Life Assurance businesses continued to progress "well", with the board increasing the total cost and capital synergy target by 70% from £720m to £1.2bn.
"Our end state operating model will incorporate the best of both legacy businesses and our management bench strength and strategic options as a combined group have increased significantly.
"Phoenix's substantial new business flows across both our heritage and open businesses through our strategic partnership with Standard Life Aberdeen bring increased sustainability to our long term cash generation.
"We are confident about our opportunities to grow in the future both organically and through BPA and acquisitions."
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