Phoenix Group has seen “record” 2022 half year results, with cash generation reaching £950m as the firm plans to deliver its target range for the year.
The firm's interim results - published today (15 August) - revealed its operating companies' cash generation in the six months to 30 June 2022 sat at £950m, up from £872m in the same period the year prior.
The results also showed £224m growth in incremental new business long-term cash generation from £206m in H1 2021 to £430m in H1 2022.
H1 2022 new business long-term cash generation comprises £282m from Phoenix's bulk purchase annuities business, compared to £80m in H1 2022, and £148m from its capital-light fee-based businesses, up from £126m in H1 2021.
Additionally, the firm saw a Solvency II surplus of £4.7bn in the first six months of the year following a £450m debt repayment. For comparison, the surplus on this basis across the whole of 2021 was £5.3bn.
The firm said it is now "confident of delivering at the top-end of our £1.3bn-£1.4bn target range for the year".
Phoenix said despite the "uncertain economic backdrop", it remains confident about the outlook for growth.
Chief executive Andy Briggs said: "Phoenix has performed very strongly in the first half of the year despite the challenging macro environment. We have once again delivered a record set of financial results, which was underpinned by the strong progress we have made across our strategic priorities. We have delivered strong cash generation of £950m and maintained our resilient balance sheet.
"We have also delivered both organic growth, with £430m of new business from our open business, and inorganic growth, with the announcement of our £248m acquisition of Sun Life of Canada UK."
He continued: "Our 2022 interim dividend has increased 3% year-on-year, and we have proposed a further 2.5% increase at our 2022 final dividend to reflect the value we expect to create with the acquisition.
"We have been working tirelessly to ensure we can support our customers and colleagues impacted by the increased cost of living - building on our programme of activities for our most vulnerable customers and offering a range of support to our colleagues including a one-off payment."
Strong volumes in bulk annuity market
Six out of the eight UK bulk annuity providers have now released their 2022 half-year results, with the remaining firms expected to announce in the coming weeks.
Last week, Aviva announced its bulk annuity sales increased 15% to £1.86bn in the first half of the year, while Legal & General's half year results confirmed its bulk annuity provider underwrote £4.4bn of pension risk transfer business across 25 deals in H1 this year.
EY Parthenon head of pension risk transfer Leah Evans said: "The first half of 2022 has seen strong volumes in the UK bulk annuity market, with buy-in and buyout transactions totalling over £12bn for the first six months compared to around £8bn for the same period in 2021.
"Favourable market conditions have meant many schemes have seen their funding levels improve significantly, making buy-ins and buyouts more affordable. Deal pipelines are continuing to fill up quickly for the second half of the year, suggesting that 2022 has the potential to close with the highest annual volume transacted in the history of this market."
However, Evans warned about the potential impact on pricing from Solvency II and said it may lead to "changes in supply or demand over the next 12 months as the rule changes become clearer".
"While it is encouraging to see this high level of market growth, there is a question mark over insurer capacity to meet demand, and smaller schemes, especially those with more complex features and structures, may find it more difficult to generate interest," she explained. "Insurers, however, are continuing to innovate and streamline their processes to address this. For schemes, the message continues to be that good preparation is key to a successful transaction."
EY bulk annuity consulting lead Chris Anderson noted: "In 2022 we have seen continued high levels of investment by insurers in the bulk annuity market, most notably in asset capabilities and the use of reinsurance to allow providers to continue to offer competitive pricing.
"The improvements to solvency ratios and capital management mean that access to capital is no longer the primary constraint on volumes that can be transacted in this market, and instead the main issue now is how many quotes and transactions insurers can operationally support.
"As a result, we've seen providers investing in their teams, systems and processes to be able to support higher volumes of quotes and transactions."
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