Phoenix Group, Europe's largest life and pensions consolidator1, announces strong results for the year ended 31 December 2019.
Financial highlights
· Strong cash generation2 of £707 million in 2019 (2018: £664 million) exceeding the upper end of its cash generation target range of £600 million - £700 million3 for the year.
· Solvency II surplus of £3.1 billion4 as at 31 December 2019 (£3.2 billion5 as at 31 December 2018).
· Shareholder Capital Coverage Ratio of 161%4,6 as at 31 December 2019 (167%5 as at 31 December 2018) demonstrating continued resilience.
· Group operating profit of £810 million in 2019 (2018: £708 million).
· Proposed final dividend of 23.4p per share (2018 final dividend: 23.4p per share) with 2019 full year dividend of 46.8p per share (2018 full year dividend7: 46.0p per share).
· New business in 2019 enhances the sustainability of our dividend by delivering £475 million of incremental long-term cash generation:
· £240 million from UK Open and Europe businesses (2018 pro forma8: £280 million); and
· £235 million from bulk purchase annuities (2018: £250 million).
· Assets under administration of £248 billion as at 31 December 2019 (£226 billion as at 31 December 2018).
· Fitch Ratings affirmed the Group's rating as A+9; "positive" outlook. Leverage ratio10 of 22% as at 31 December 2019 (22% as at 31 December 2018).
Cash generation targets
· 2020 cash generation target of £800 - £900 million.
· 5 year cash generation target (2019 - 2023) increased by £0.1 billion to £3.9 billion for new business written during 2019.
· Long-term cash generation guidance remains at £12 billion after 2019 cash remittance of £707 million, demonstrating offsetting nature of new business written in the year.
Standard Life Assurance transition programme
· Remains on track to deliver the £1.2 billion total synergy target.
· Enlarged partnership with Tata Consultancy Services announced will support delivery of Hybrid end state Customer Service and IT operating model.
· £145 million of capital synergies delivered in 2019, taking cumulative capital synergies to £645 million against a target of £720 million (90% of total).
· £33 million per annum cost savings delivered to date against a target of £75 million per annum (44% of total).
Delivering on strategic priorities
· £3.2 billion acquisition of ReAssure Group plc on track to complete mid-2020, subject to regulatory approvals.
· Exceeded all customer service metric targets and continued investment in customer proposition.
· £7.0 billion gross new business inflows for UK Open and Europe businesses in 2019 (2018 pro forma8: £8.5 billion) generating a new business contribution11 of £158 million (2018 pro forma8: £154 million).
· £1.1 billion of bulk purchase annuity liabilities contracted in 2019 (2018: £0.8 billion).
· £1.1 billion buy-in from the PGL Pension Scheme successfully completed.
· £1.3 billion of illiquid assets sourced, taking allocation of illiquid assets backing annuity liabilities to 26%.
· £500 million Solvency II benefit from management actions delivered in the year in addition to £145 million of Standard Life Assurance transition programme capital synergies.
Commenting on the results, Group CEO, Clive Bannister said:
"Phoenix has had a strong year - we beat our cash generation target, made significant progress in the transition of Standard Life Assurance and announced the £3.2 billion acquisition of ReAssure. With circa £0.5 billion of incremental cash generation delivered from new business written in the year, we have demonstrated that our Open businesses and BPA bring sustainability to Phoenix, offsetting the run-off of our in-force business. I am extremely proud of the evolution of Phoenix during my time as CEO and I would like to thank all of the colleagues I have worked with throughout to deliver benefits to both our customers and shareholders."
Nicholas Lyons, Chairman commented:
"I am delighted to welcome Andy Briggs to the Group as Clive's successor as CEO and to announce today that Rakesh Thakrar will succeed Jim McConville as Group Finance Director when he retires in May. Andy and Rakesh inherit a Group that is delivering on its financial and operational targets and is strategically positioned to capture future opportunities in the life and pensions industry. The ReAssure transaction will deliver £7 billion of incremental cash generation and, alongside supporting the dividend, will give us an enhanced platform to pursue further growth opportunities. I would like to reiterate my thanks to both Clive and Jim for everything they have achieved at Phoenix, during which time they have transformed and grown the business to become the largest life and pensions consolidator in Europe."
