20th Aug 2015 06:35
LONDON (Alliance News) - Phoenix Group Holdings on Thursday said it is on track to meet its financial targets, as the life insurance company reported lower cash generation and operating profit in the first half.
The FTSE 250 company also named Henry Staunton as its new chairman, the successor to Howard Davies, who is stepping down at the end of August to join Royal Bank of Scotland Group PLC in the same role. Staunton also is the chairman of retail group WH Smith PLC, and performs the same role at rent-to-own company BrightHouse Group.
Phoenix, which manages life funds that are closed to new business, said it generated GBP110 million in cash in the six months to the end of June, down from GBP332 million in the corresponding half the prior year.
Phoenix said its performance in the half puts it on track to meet its targets of generating between GBP200 million and GBP250 million in cash in 2015 and GBP2.8 billion from 2014 to 2019.
Operating profit fell by 49% to GBP135 million in the half, as the benefit from management actions - which are measures around restructuring, risk management, operational management and outsourcing designed to release capital, accelerate cash flows or boost market consistent embedded value - fell to GBP23 million from GBP114 million in the corresponding half last year.
MCEV, a measure of the consolidated value of shareholders' interests, was GBP2.58 billion at the end of June, down from GBP2.65 billion at the end of 2014, mainly due to the payment of last year's final dividend and market movements, partly offset by GBP84 million of management actions.
That GBP84 million achieved in the first half puts Phoenix on track to meet its so-called incremental MCEV target of GBP400 million between 2014 and 2016, having achieved GBP345 million from management actions.
Phoenix said it submitted in June its application for approval of its internal model in connection with Solvency II insurance rules coming into force across the European Union from January 2016.
"The first half of 2015 has been a busy one for the group. In particular, the work undertaken for the introduction of Solvency II has involved a huge commitment from many employees and our customer team has also capably managed the introduction of the new pension freedoms," Chief Executive Clive Bannister said in a statement.
Bannister, the former managing director of insurance and asset management at HSBC, has been directing a strategy focused on achieving an investment grade rating ? secured earlier in August ? and preparing for the new Solvency II regulations, which cover requirements for capital strength, governance and risk management, and disclosure and transparency.
"I continue to believe that the impact of regulatory changes will not only change the landscape of the UK life insurance industry but will also provide Phoenix with a number of opportunities, as open life companies are forced to reappraise their business models and strategies for their legacy policies," Bannister said.
Since Bannister joined in 2011, Phoenix has strengthened its balance sheet by cutting debt and selling Ignis Asset Management to Standard Life in April 2014 for GBP390 million, both of which have been critical in being rated investment-grade by ratings agency Fitch Ratings and attaining the financial strength to target the GBP300 billion plus of assets the company estimates are contained within legacy funds in the UK.
"Following the achievement of the investment grade credit rating and continued financial delivery against our targets, the group is well positioned to take advantage of these industry changes," Bannister said.
"Irrespective of the wider ongoing challenges, our focus will remain on the continued delivery of strong organic performance across all of our key financial metrics and targets. We have consistently met or exceeded all of our public financial targets and this is a track record that we are committed to continuing," Bannister added.
Phoenix maintained its interim dividend at 26.7 pence per share.
By Samuel Agini; [email protected]; @samuelagini
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