Phoenix Group (LON:PHNX), Europe’s largest life and pensions consolidator1, today announced a strong set of results for the year ended 31 December 2018.
· £664 million of cash generation2 in 2018 (2017: £653 million). The Group has delivered £1.3 billion cash generation in 2017 and 2018, exceeding the upper end of its cash generation target range of £1.0 billion – £1.2 billion for this period.
· Solvency II surplus of £3.2 billion3 as at 31 December 2018 (£2.5 billion pro-forma as at 31 December 2017).
· Shareholder Capital Coverage Ratio of 167%4 as at 31 December 2018 (147% pro-forma as at 31 December 2017).
· Proposed final dividend of 23.4p per share, a 3.5% increase on the 2017 final dividend.
· Group operating profit of £708 million (2017: £368 million).
· Assets under administration of £226 billion as at 31 December 2018 (31 December 2017 pro-forma: £240 billion). Net business inflows of £3.9 billion on UK Open and European businesses.
· New business contribution5 of £154 million (2018 pro-forma) demonstrates value accretive nature of Open new business in the UK and Europe.
· Fitch Ratings affirmed the Group’s ratings at A+6; “stable” outlook. Leverage ratio 22%7.
New cash generation targets
· 2019 cash generation target of £600 – £700 million8.
· Long-term cash generation target for 2019 – 2023 of £3.8 billion.
Acquisition of the Standard Life Assurance businesses
· Acquisition of the Standard Life Assurance businesses completed on 31 August 2018.
· Total synergy target (net of £150 million transition costs) increased by £500 million from £720 million to £1,220 million:
– Capital synergies new target of £720 million (increased from £440 million); with £500 million delivered to date; and
– Capitalised cost synergies new target of £650 million (increased from £415 million); reflecting an increase from £50 million to £75 million per annum.
Delivering on strategic priorities
· Successfully entered bulk purchase annuity market contracting £0.8 billion of liabilities in 2018.
· AXA and Abbey Life integrations completed ahead of plan and targets, delivering cost synergy benefits of £27 million per annum and cumulative cash generation of £968 million.
· Diligenta selected as Phoenix’s partner to deliver a single, digitally enhanced outsourcer platform to a further 2 million legacy-Phoenix policies.
· Brexit preparations complete.
· On-shoring project completed with UK plc in place.
Commenting on the results, Group CEO, Clive Bannister said:
“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.
These results show the strength of our Group and have enabled us to again increase our short and long term cash generation targets.
The transition of the Standard Life Assurance businesses continues to progress well and today we increase the total cost and capital synergy target by 70% from £720 million to £1.2 billion. 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.”