14th Mar 2022 14:11
(Alliance News) - Phoenix Group Holdings PLC on Monday penned a new shareholder payout policy following a record 2021 as the company can look forward to "drive its own destiny".
For the year, the London-based insurance services provider posted record cash generation of GBP1.72 billion, edging upwards from the GBP1.71 billion generated the year before, and ahead of its target range of GBP1.5 billion to GBP16 billion.
Steve Clayton, fund manager at Hargreaves Lansdown Select, which holds Phoenix shares in the HL Select UK Growth Shares fund, said: "This is a pivotal moment for Phoenix. Ever since the Standard Life acquisition, the group has been talking about 'proving the wedge'.
"The revelation that new business is now more than offsetting the natural decline of the acquired legacy books upon which the group is built shows that the group is now driving its own destiny organically."
Phoenix's pretax loss for 2021 was GBP688 million, swinging from a profit of GBP944 million, reflecting GBP1.13 billion in adverse investment return variances, and GBP639 million in charges for amortisation and impairments.
However, operating profit increased 2.5% to GBP1.23 billion from GBP1.20 billion, due to a full contribution from the group's ReAssure business and increased bulk purchase annuity new business in the period.
Revenue grew 36% year-on-year to GBP6.38 billion from GBP4.70 billion, while as at December 31, total assets under administration edged up 1% to GBP310 billion from GBP307 billion, restated to reflect the sale of GBP29 billion of assets from the Wrap SIPP, TIP and Onshore Bond businesses sold.
Phoenix declared a final dividend of 24.8 pence per share, bringing the total payout to 48.9p, up 2.9% from 47.5p the prior year.
HL's Clayton said: "The dividend increase announced today leaves the stock trading on a very attractive yield of 7.8%. Phoenix's challenge is now to prove that they can indeed maintain their new business capabilities and support the growth of their dividend into the future."
Phoenix said that 2021 had seen the company "prove the wedge", meaning that organic growth from its Open business had more than offset the run-off from its Heritage business for the first time.
Peel Hunt analyst Andreas van Embden said: "Phoenix released a higher than expected level of cash from the in-force Life portfolio in 2021 and managed to deliver sufficient new business to more than offset the natural unwinding of the back book.
"The company has brought forward cash releases in 2021 and we believe it is broadly meeting its three-year and long-term cash generation targets. Confident of delivering high levels of new business cash, Phoenix is moving to a new dividend policy of sustainable dividend per share growth. With a yield of about 8% and trading at 0.7x SII Tier I NAV, the shares having drifted back, the stock does not seem to be expensive."
Peel Hunt has a 'hold' rating on Phoenix with a target price of 690 pence.
Shares in FTSE 100-listed Phoenix were up 1.2% at 633.60 pence on Monday afternoon in London. The stock is down 3.0% in 2022 so far, and has shed 12% over the past 12 months.
Chief Executive Officer Andy Briggs said: "It has been an outstanding year for Phoenix, with a record set of financial results and significant strategic progress made as we fully embraced our purpose. 2021 marked a pivotal moment for Phoenix, with GBP1.2 billion of new business from our Open business more than offsetting the run-off of our Heritage business for the first time.
"This demonstrates that Phoenix is a growing, sustainable business, and enabled the board to recommend our first ever organic dividend increase of 3%. Phoenix has also today announced a new dividend policy which sets out our intention to pay a dividend that is sustainable and grows over time."
By Paul McGowan; [email protected]
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