Phoenix Group delivers a strong H1 performance with £872m of cash generation

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Phoenix Group Holdings PLC (LON:PHNX) has announced its 2021 half year results.

Financial highlights

Delivering cash

· Strong cash generation¹ of £872m in H1 2021 (H1 2020: £433m) has more than doubled reflecting the scale of the enlarged Group; on track to deliver at top end of £1.5bn-to-£1.6bn target range for FY 2021.

· Interim dividend of 24.1p per share declared (2020 interim: 23.4p per share).

Delivering resilience

· Resilient balance sheet reflected in a Solvency II surplus of £5.1bn² as at 30 June 2021 (31 December 2020: £5.3bn³) following a £0.2bn debt repayment in March 2021.

· Shareholder Capital Coverage Ratio^2,4 of 166% as at 30 June 2021, comfortably within the Group’s target range of 140%-to-180% (31 December 2020: 164%).

· Leverage ratio⁵ of 28% as at 30 June 2021 is within target range of 25%-to-30% (31 December 2020: 28%).

Delivering growth

· £412m of new business long-term cash generation comprises £206m completed in H1 2021 and a further £206m subsequently completed in July 2021 through an additional c.£1bn buy-in tranche of the Pearl Pension Scheme (H1 2020: £358m⁶).

· Capital strain on all BPA new business reduced to 6% (FY 2020: 8% external deals and 12% Pearl Pension Scheme) reflecting expected efficiencies from internal model harmonisation.

Other key financial metrics

· Group operating profit of £527m in H1 2021 (H1 2020: £361m).

· Assets under administration of £304bn as at 30 June 2021 (31 December 2020: £338bn) due to the planned disposals of the Wrap SIPP, Onshore Bond and TIP products to abrdn plc and of Ark Life⁷.

Continuing to deliver on our strategic priorities

· Acquired and now taken ownership of the Standard Life brand, which will be invested in to support future growth.

· Maximising shareholder value from our European operations through the sale of Ark Life for a total cash consideration of €230m (£197m⁸) equating to 0.91x Solvency II Own Funds.

· Fitch credit rating upgraded to AA- reflecting the resilience of the Phoenix Group’s business model.

· Internal model harmonisation application submitted in March 2021 with a final decision expected from the PRA by the end of September 2021; estimated increase of £0.4bn to the Group’s Solvency II surplus and £0.1bn to future cash generation.

· High quality £33bn shareholder debt portfolio is 99% investment grade with only 19% rated BBB and 2% BBB-

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· 67% year-on-year increase in illiquid asset origination in H1 2021 with £1.3bn of assets originated (H1 2020: £0.8bn).

· £276m Solvency II benefit from H1 2021 management actions including £208m from business-as-usual actions such as illiquid origination and asset risk management, and £68m of integration synergies from Standard Life and ReAssure.

· Strong customer satisfaction scores maintained at >90%, exceeding our targets; our investment in digital is resonating with customers with a 34% year-on-year increase in mobile app logins.

Sustainability is at the core of our purpose and a key enabler of our strategy

· More than doubled the Phoenix Group’s investment in ESG-related illiquid assets to £788m (H1 2020: £340m).

· Joined net-zero asset owner alliance and Race to Zero campaign, with an open letter sent to our asset management partners to drive change in the responsible investment eco-system.

· On track to reduce Scope 1 and Scope 2 greenhouse gas emissions from occupied premises per FTE intensity by 20% in 2021, with all occupied premises using 100% renewable electricity by the end of 2021.

· On track to deliver target of engaging 75% of our suppliers on decarbonisation plans with 55% engaged YTD.

Commenting on the results, Phoenix Group CEO, Andy Briggs said:
“Phoenix has made further strong progress against our stated priorities of cash, resilience and growth. Our cash generation doubled to £872 million, we maintained a highly resilient balance sheet and we delivered 15% growth in new business long-term cash generation to £412 million. I am also pleased with the strategic progress we made in the period. Our ownership of the Standard Life brand will support our Open growth strategy, while the disposal of Ark Life will maximise value for shareholders and simplify our European operations.
We remain fully committed to our sustainability agenda which is aligned with our purpose of ‘helping people secure a life of possibilities’. We have made good progress against our sustainability targets, including directing almost £800 million of long-term investment into ESG-related projects and we remain well placed to support the UK to build back better and greener. We look forward to continuing to execute against our strategic priorities in the second half of the year as we build on our position as the UK’s largest long-term savings and retirement business.”