Phoenix Group, the UK-based life consolidation specialist has released its half-year results, with a bumper expectation of £1.3-£1.4bn in cash generation.
Phoenix recently acquired closed life insurer Sun Life of Canada's UK unit for £248m in its first-ever cash funded acquisition and highlighted it had more than £1bn to spend on similar deals.
The group reported:
• Cash generation up 9% to £950m
• Solvency II Surplus of £4.8bn and Shareholder Capital Coverage Ratio of 186% (2021 £5.3bn and 180%)
• New Business Long Term Cash Generation of £430m up 107%
• Interim Dividend up 3% to 24.8p and a further 2.5% proposed for the full year following the Sun Life acquisition.
Steve Clayton, fund manager at HL Select said: "These are a solid set of numbers from Phoenix that show the company executing well against all of their key targets. Cash generation is up and acquisitions have delivered their synergy expectations. The group have cash surplus and capital, so expect further acquisitions down the line. The business hedges risks to the maximum extent possible and saw little impact when markets tumbled in the first half.
"Crucially, Phoenix say this morning that they have almost no exposure to inflation, having hedged out their costs and product exposures. No doubt analysts will quiz them later on how long this hedging will run for. But right now, that protection from rising costs puts Phoenix in an enviable position relative to most UK companies.
"The group is writing significant and growing new business volumes, showing how far it has come from just consolidating and running-down old closed-book life companies. The group talk about their structure creating the prospects for a dividend that is "sustainable and grows over time".
"Given that the stock yields around 7.3% that is an attractive prospect, which is why we hold Phoenix in our HL Select UK Income Shares fund. The market has reacted positively, pushing the shares 0.6% higher in early trading."
