Phoenix Group jumps on strong results as it sets out strategy
By Josh White
Date: Friday 22 Mar 2024
(Sharecast News) - Phoenix Group announced robust set of results for 2023 on Friday, with total cash generation of £2.024bn exceeding its upgraded target of £1.8bn for the year.
The FTSE 100 company said that included a substantial benefit of around £400m from the part VII transfer of Standard Life and Phoenix Life, announced in November.
It achieved £1.514bn in incremental new business long-term cash generation, surpassing its 2025 target of £1.5bbn two years ahead of schedule.
That growth was attributed to strong performances in its capital-light pensions and savings business, which reached £395m, and its retirement solutions business, which increased to £1.066bn, supported by enhanced capital efficiency.
In terms of capital resilience, Phoenix Group maintained a robust balance sheet with a Solvency II surplus of £3.9bn, including a prudent £70m Consumer Duty provision.
The company's SII shareholder capital coverage ratio stood at 176%, towards the top end of its operating range of 140% to 180%.
Additionally, Phoenix said it was aiming to reduce debt, targeting a repayment of at least £500m by the end of 2026, with a goal of achieving a SII leverage ratio of around 30%.
Driving improved profitability, Phoenix reported a 13% increase in IFRS adjusted operating profit before tax to £617m, with strong growth in its pension and savings business, up 27% year-on-year to £190m.
The company also saw a 72% year-on-year increase in new business net fund flows, reaching £6.7bn, primarily driven by strong workplace flows.
Furthermore, Phoenix Group significantly reduced its IFRS loss after tax to £88m, attributed to lower market volatility impacts in 2023.
In line with its business performance, Phoenix Group recommended a 2.5% increase in the final 2023 dividend to 26.65p per share, resulting in a total dividend of 52.65p.
Looking ahead, the company said it was aiming to deliver growing, sustainable cash generation as part of its next phase of strategy, intending to grow operating cash generation by 25% from £1.1bn in 2023 to £1.4bn in 2026.
Furthermore, the company said it was planning to evolve its financial framework with new targets and guidance.
That included a focus on growing operating cash generation, maintaining a resilient balance sheet, and driving strong growth in IFRS adjusted operating profit through business growth and cost efficiencies.
The company said it was aiming to achieve £900m of IFRS adjusted operating profit in 2026 and £250m of annual cost savings by the same year.
"Phoenix's vision is to be the UK's leading retirement savings and income business, and we are making great progress in delivering our strategy to achieve this, as our strong 2023 financial results demonstrate," said chief executive officer Andy Briggs.
"We have achieved our 2025 growth target two years early with £1.5bn of new business cash delivered by our Standard Life business - a new record.
"We delivered over £2bn of cash generation and maintained our resilient balance sheet, and our strong performance has enabled the board to recommend a 2.5% dividend increase."
Briggs said the next phase of the company's strategy would see it balance uts investment across its our strategic priorities to grow, optimise and enhance the business.
"This will support us in delivering the ambitious new 2026 targets we are announcing today.
"Our confidence in this strategy is demonstrated by the new progressive and sustainable dividend policy we will operate going forward."
At 0900 GMT, shares in Phoenix Group Holdings were up 9.38% at 533p.
Reporting by Josh White for Sharecast.com.
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