Phoenix Group is building operating
momentum as it executes on its 3-year strategy
Commenting on the results
announcement, Phoenix Group CEO, Andy Briggs said:
"Phoenix's
vision is to be the UK's leading retirement savings
and income business, and I am pleased with the initial progress we
have made in executing on our 3-year strategy, as our 2024 interim
financial results demonstrate.
We have delivered
19% growth in Operating Cash Generation and remitted total cash
generation of £950 million in the first half. We have generated
3%pts of recurring Solvency II capital and our resilient balance
sheet has enabled us to repay £250 million of debt and to invest in
our business. Strong growth in our capital-light Pensions and
Savings business in particular has supported a 15% increase in
operating profit. The Board has declared an Interim dividend which
is a 2.5% year-on-year increase.
I am confident that
as we continue to execute on our strategy we are building a growing
business that is on track to deliver our financial targets and
create shareholder value."
H1 2024 financial results
highlights
Cash
·
£647m Operating Cash Generation1 (H1
2023: £543m) increased 19%, driven by increased surplus from our
growing business and strong delivery of recurring management
actions.
·
£950m total cash generation2 (H1 2023:
£898m) and we are confident of delivering at the top-end of our
£1.4-1.5bn target range in 2024.
Capital
·
+3%pts of recurring Solvency II ('SII') capital
generation in H1, supported by recurring Own Funds
growth.
·
£3.5bn3 SII surplus remains resilient
(FY 2023: £3.9bn), after planned £0.25bn debt repayment and
c.£0.2bn investment into our strategic priorities.
·
168%3,4 Shareholder Capital Coverage
Ratio (FY 2023: 176%4), remains in top-half of our
140-180% operating range.
·
£250m of debt repayment in the period, in line
with our intention to repay at least £500m by the end of 2026; SII
leverage ratio reduced to 35% (FY 2023: 36%), with (2)%pts debt
repayment benefit partly offset by a reduction in Regulatory Own
Funds from higher interest rates due to our SII hedging
approach.
Earnings
·
IFRS adjusted operating profit increased 15% to
£360m (H1 2023: £313m5), driven by profitable growth in
both Pensions and Savings (£149m) and Retirement Solutions
(£210m).
·
IFRS loss after tax of £(646)m (H1 2023: £(245)m),
primarily due to £(698)m of adverse economic variances from higher
interest rates and global equities which are the consequence of our
SII hedging approach.
·
IFRS shareholders' equity therefore reduced to
£1.8bn (FY 2023: £2.7bn6 restated), but the reduction in
interest rates since June has reversed some of the economic
variances and this reversal will continue as interest rates reduce
further.
·
Contractual Service Margin (gross of tax) grew 10%
to £3.1bn (FY 2023: £2.9bn), driven by new business, management
actions and the one-off impacts of the buy-out of an internal
pension scheme and modelling refinements.
A progressive and sustainable
ordinary dividend policy7
·
The Board has declared a 2024 Interim dividend of
26.65p per share, equal to the 2023 Final dividend, a 2.5% increase
compared to the 2023 Interim dividend.
H1 financial performance enabled by
progress across our strategic priorities of Grow, Optimise and
Enhance
Grow
·
83% growth in Workplace net fund flows to £3.3bn
(H1 2023: £1.8bn), as we retain our existing customers and win new
schemes; H1 includes c.£900m new scheme win asset transfer from a
technology business.
·
Launched Standard Life Smoothed Return Pension
Fund and Standard Life Guaranteed Fixed-term Income products to
support reduction in net fund outflows over time.
·
£1.7bn of annuity premiums written (H1 2023:
£3.2bn), with a further £0.4bn of BPAs transacted since the end of
June and an additional £2.2bn of exclusive BPA transactions in
progress.
·
Reduced annuity capital strain to c.3%8
(FY 2023: 4.7%), reflecting full benefit of the Part VII funds
merger completed in 2023 and balance sheet
diversification.
·
Expect to deploy c.£200m of capital into annuities
this year and to write annual premiums of c.£6bn.
Optimise
·
£250m debt repayment in June as we deleverage our
balance sheet.
·
£264m of recurring management actions in H1 across
a large number of BAU actions to more efficiently manage our
portfolio, with no change in our risk profile; now expect to
deliver c.£400m of recurring management actions in 2024.
·
Launched a new private markets investment manager
- Future Growth Capital - in partnership with Schroders.
Enhance
·
Combined our Heritage and Open divisions into a
single Group-wide structure and continue to progress our migrations
with c.550k ReAssure customers scheduled to migrate to the TCS
Diligenta platform by the end of September.
·
Business simplification progress means we expect
to deliver c.£50m of run-rate cost savings by the end of
2024.
Phoenix discontinues the SunLife
sale process
·
SunLife is a leading provider of financial
protection products direct to the over 50s market in the UK and a
valuable asset which contributes to the Group's new business
growth.
·
Given the current uncertainty in the protection
market, the Board has decided to discontinue the sale process and
will focus on enhancing the value it generates within the
Group.
On track to deliver our financial
targets which support our progressive and sustainable
dividend
·
Cash:
o Operating Cash Generation target of £1.4bn in 2026.
o Total cash generation 1-year target range of £1.4-1.5bn in
2024 and 3-year target of £4.4bn across 2024-26.
·
Capital
o Continue to operate within our 140-180% Shareholder Capital
Coverage Ratio operating range.
o Targeting a SII leverage ratio of c.30% by the end
of 2026.
·
Earnings
o Targeting £900m of IFRS adjusted operating profit in
2026.
o £250m of annual run-rate cost savings by the end of
2026.
Information required under the
Disclosure Guidance & Transparency Rules ('DTR')
Information required to be communicated in unedited
full text, in accordance with DTR 6.3.5R(1A), is included in the
Interim Report.
A copy of Phoenix Group Holdings plc's Interim Report
for the period ended 30 June 2024 is available at: http://www.rns-pdf.londonstockexchange.com/rns/2311E_1-2024-9-15.pdf
In accordance with Listing Rule 6.4.1, a copy of the
Interim Report has been submitted to the National Storage Mechanism
and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The document may also be accessed
via the Phoenix Group website at:
https://www.thephoenixgroup.com/investors/results-reports-and-presentations/
Enquiries
Investors/analysts:
Claire Hawkins, Director of Corporate Affairs &
Investor Relations, Phoenix Group
+44 (0)20 4559 3161
Andrew Downey, Investor Relations Director, Phoenix
Group
+44 (0)20 4559 3145
Media:
Douglas Campbell, Teneo
+44 (0)7753 136 628
Shellie
Wells, Corporate Communications
Director, Phoenix Group
+44 (0)20
4559 3031
Presentation and webcast
details
There will be a live virtual
presentation for analysts and investors today starting at 09:30
(BST). You can register for the live webcast at:
Phoenix Group 2024 half year results
A copy of the presentation and a
detailed financial supplement will be available at:
https://www.thephoenixgroup.com/investors/results-reports-and-presentations/
A replay of the presentation and
transcript will also be available on our website following the
event.
Dividend details
The declared 2024 Interim dividend
of 26.65 pence per share is expected to be paid on 31 October
2024.
The ordinary shares will be quoted
ex-dividend on the London Stock Exchange as of 3 October 2024. The
record date for eligibility for payment will be 4 October
2024.
Footnotes
|
1.
|
Operating Cash Generation ('OCG')
represents the sustainable level of ongoing cash generation from
our underlying business operations, that is remitted from our Life
Companies to the Group.
|
|
2.
|
Total cash generation represents the
total cash remitted from the operating entities to the Group,
comprising OCG, non-recurring management actions and the release of
free surplus above capital requirements in the Life
Companies.
|
|
3.
|
30 June 2024 Solvency II capital
position is an estimated position and reflects a dynamic
recalculation of transitionals for the Group's Life Companies. Had
the dynamic recalculation not been assumed, the Solvency II surplus
and the Shareholder Capital Coverage Ratio would increase by £0.2
billion and 3%pts respectively.
|
|
4.
|
The Shareholder Capital Coverage
Ratio excludes Solvency II Own Funds and Solvency Capital
Requirements of unsupported With-Profit funds and unsupported
pension schemes.
|
|
5.
|
Incorporates changes to the Group's
methodology for determining adjusted operating profit since HY
2023. Further information on these changes
can be found in Note 3 to the condensed
consolidated financial statements in the
2024 Interim Financial Report.
|
|
6.
|
The Group identified material
corrections to previously reported results resulting in a
restatement of comparative information, including the restatement
of the FY 2023 shareholders' equity from £2.5 billion as reported
to £2.7 billion. Further information on this restatement can be
found in Note 1 to the condensed
consolidated financial statements in the
2024 Interim Financial Report.
|
|
7.
|
The Board will continue to
prioritise the sustainability of our dividend over the long term.
Future dividends and annual increases will continue to be subject
to the discretion of the Board, following assessment of longer-term
affordability.
|
|
8.
|
Annuity capital strain on a Post
Capital Management Policy basis.
|
Legal Disclaimers
This announcement in relation to
Phoenix Group Holdings plc and its subsidiaries (the 'Group')
contains, and the Group may make other statements (verbal or
otherwise) containing, forward-looking statements and other
financial and/or statistical data about the Group's current plans,
goals, targets, ambitions, outlook, guidance and expectations
relating to future financial condition, performance, results,
strategy and/or objectives.
Statements containing the words:
'believes', 'intends', 'will', 'may', 'should', 'expects', 'plans',
'aims', 'seeks', 'targets', 'continues' and 'anticipates' or other
words of similar meaning are forward looking. Such
forward-looking statements and other financial and/or statistical
data involve risk and uncertainty because they relate to future
events and circumstances that are beyond the Group's control. For
example, certain insurance risk disclosures are dependent on the
Group's choices about assumptions and models, which by their nature
are estimates. As such, actual future gains and losses could differ
materially from those that the Group has estimated.
Other
factors which could cause actual results to differ materially from
those estimated by forward-looking statements include, but are not
limited to: domestic and global economic,
political, social, environmental and business conditions; asset
prices; market-related risks such as fluctuations in investment
yields, interest rates and exchange rates, the potential for a
sustained low-interest rate or high interest rate environment, and
the performance of financial or credit markets generally; the
policies and actions of governmental and/or regulatory authorities
including, for example, climate change and the effect of the UK's
version of the 'Solvency II' regulations on the Group's capital
maintenance requirements; developments in the UK's relationship
with the European Union; the direct and indirect consequences for
European and global macroeconomic conditions of the conflicts in
Ukraine and the Middle East, and related or other geopolitical
conflicts; political uncertainty and instability; the impact of
changing inflation rates (including high inflation) and/or
deflation; information technology or data security breaches
(including the Group being subject to cyber-attacks); the
development of standards and interpretations including evolving
practices in ESG and climate reporting with regard to the
interpretation and application of accounting; the limitation of
climate scenario analysis and the models that analyse them; lack of
transparency and comparability of climate-related forward-looking
methodologies; climate change and a transition to a low-carbon
economy (including the risk that the Group may not achieve its
targets); the Group's ability along with governments and other
stakeholders to measure, manage and mitigate the impacts of climate
change effectively; market competition; changes in assumptions in
pricing and reserving for insurance business (particularly with
regard to mortality and morbidity trends, gender pricing and lapse
rates); the timing, impact and other uncertainties of any
acquisitions, disposals or other strategic transactions; risks
associated with arrangements with third parties; inability of
reinsurers to meet obligations or unavailability of reinsurance
coverage; and the impact of changes in capital, and implementing
changes in IFRS 17 or any other regulatory, solvency and/or
accounting standards, and tax and other legislation and regulations
in the jurisdictions in which members of the Group
operate.
As a result, the Group's actual
future financial condition, performance and results may differ
materially from the plans, goals, targets, ambitions, outlook,
guidance and expectations set out in the forward-looking statements
and other financial and/or statistical data within this
announcement. The Group undertakes no obligation to update any of
the forward-looking statements or data contained within this
announcement or any other forward-looking statements or data it may
make or publish. Nothing in this announcement constitutes, nor
should it be construed as, a profit forecast or
estimate.