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Phoenix Group (LSE:PHNX), a leading UK-based provider of long-term savings and retirement products, has reported robust financial results for the first half of 2024, highlighting increased cash generation and operating profit as it continues to execute its 3-year strategic plan. The Group’s focus on efficiency, capital strength, and profitable growth has positioned it well in a challenging economic environment.
Boost in Operating Cash Generation
Phoenix generated £647 million in operating cash in H1 2024, reflecting a 19% increase from the £543 million recorded in the first half of 2023. This growth was driven by the company’s expanding business base and recurring management actions, which are helping to deliver strong cash flow performance. Total cash generation also saw a rise, reaching £950 million (H1 2023: £898 million). This sets Phoenix on track to achieve the upper end of its 2024 target range of £1.4-1.5 billion. The company remains confident in hitting its longer-term goal of £4.4 billion in total cash generation over the 2024-2026 period.
Earnings Growth in Pensions and Retirement Solutions
Phoenix’s IFRS adjusted operating profit for the first half of 2024 rose by 15% to £360 million, up from £313 million in H1 2023. This increase was largely fueled by gains in its Pensions and Savings division (£149 million) and Retirement Solutions division (£210 million), showcasing the strength of its core business areas.
Despite the growth in operating profit, Phoenix recorded a post-tax IFRS loss of £(646) million, compared to a loss of £(245) million in H1 2023. The loss was primarily attributed to £(698) million of adverse economic variances driven by higher interest rates and global equity market performance. Phoenix’s solvency hedge, part of its Solvency II (SII) framework, contributed to these economic variances. However, the company noted that recent reductions in interest rates have begun to reverse some of these impacts, with further improvement expected as rates continue to fall.
SunLife Sale Discontinued Amid Market Uncertainty
Phoenix has announced that it will discontinue the planned sale of SunLife, a provider of financial protection products for the over-50s market in the UK. The decision comes amid ongoing uncertainty in the UK protection market. Phoenix’s board believes that retaining SunLife will enhance its value within the Group, contributing to new business growth moving forward.
On Track to Achieve Financial Targets
Looking ahead, Phoenix remains focused on delivering its key financial targets, which are designed to support its progressive and sustainable dividend policy. By 2026, the company aims to achieve £1.4 billion in operating cash generation and £900 million in IFRS adjusted operating profit. Phoenix also continues to target £250 million in annual cost savings by the end of 2026.
Strengthening Capital Position
The Group has maintained a strong capital position, operating within its Shareholder Capital Coverage Ratio range of 140-180%. Phoenix is also working towards reducing its SII leverage ratio to approximately 30% by 2026, further reinforcing its financial resilience.
