Phoenix Group smashes forecasts with cash generation

The company said it is now on track to deliver positive group net fund flows from 2024 for the first time in its history.

New business net fund flows amounted to £3.1bn in the six months to 30 June, up from £1.8bn in the first half of 2022.

Incremental new business long-term cash generation, an important measure of future profitability, jumped 106% year-on-year to £885m. According to analysts' consensus estimates compiled by the company, the market was expecting a figure closer to £519m.

The beat was a result from a huge jump from its Retirement Solutions division, to £665m from £282m, and £220m from its capital-light fee-based business, up from £148m previously.

Total cash generation fell to £898m, from £950m the year before, but still well ahead of the £733m expected by analysts. Phoenix said it is confident of delivering cash generation at the top end of the £1.3-1.4bn target range for 2023 as a whole.

One red flag was the Solvency II shareholder capital coverage ratio, which represents the amount of funds that insurance and reinsurance companies are required to hold by law. This slipped to 180%, from 189% at the end of 2022, though Phoenix reassured that it remains at the top end of the 140-180% target range.

Nevertheless, Phoenix raised its interim dividend to 26p per share, up from the 24.8p payout in the first half of 2022.

"We are delivering strong organic growth, with new business long-term cash more than doubling to £885 million in the first half," said chief executive Andy Briggs.

"We also grew inorganically, with the completion of the Sun Life of Canada UK acquisition, with c.20% of the purchase price received in cash generation in just three months, and we are confident of executing further M&A over time."