The FTSE 250 company, which specialises in running life insurance businesses that are no longer open to new customers, made a profit of £215m ($275.7m, €233.8m) compared with £107m during the same period last year before the deduction of interest and taxes – 100% ahead of a year ago.
The company said on Thursday the Axa Wealth acquisition for which it paid £373m in May 2016 had generated £282m of cash so far, exceeding a target of £250m within six months.
Savings from the Abbey Life acquisition are also coming through “ahead of expectations” and are forecast to be between £13m to £15m per annum, compared to a predicted £10m.
Acquisition drive
Last year Phoenix also bought Abbey Life from Deutsche Bank for £933m.
The firm said the Abbey Life deal will contribute to cost savings for an additional £7m.
“The group continues to deliver strong cash generation and remains on track to achieve its targets, supported by capital and cost synergies from the Axa and Abbey Life acquisitions,” group chief executive Clive Bannister commented.
Back in March, Bannister announced there would be further acquisitions in the pipeline, a concept reinforced by Phoenix Life chief executive Andy Moss in conversation with International Adviser.
“We are forever looking at ways of enhancing services, delivering cash for our shareholders, creating extra value for policyholders and reducing expenses.
“Over the next year, it will be a key focus for us to integrate the two businesses we acquired last year. That will bring some challenges but, given our experience, we feel well equipped to integrate them. Phoenix Group will be stronger at the end of it.”
IT job cuts
Earlier this week, Phoenix Life announced redundancy plans with cuts of up to 60 jobs resulting from the Axa acquisition.
Phoenix is currently integrating the businesses, moving Axa to an outsourced customer service model managed by third party firm Diligenta.
As part of this the customer support will now be coming from the firm’s Wythall site, with around 50 to 60 jobs mostly cut from the IT support division of the Basingstoke branch, Phoenix Life chief executive Andy Moss said.
Bulk annuity portfolios
The conglomerate is also considering buying some of the bulk annuity portfolios that have come on the market in recent months, as it expects demand for the products – which involve insurers taking over a company’s final salary pension scheme – to grow to £350bn in the next decade.
Phoenix’s focus, however, remains Britain’s £300bn closed life market with bulk annuities just an addition group chief executive Bannister told the Reuters news agency.
“We see annuities as complementary and evolutionary to what we do, but this is an evolution rather than a refocusing,” Bannister said, adding bulk annuities make up £13bn of Phoenix’s 75 billion of the assets it manages for about 6.1m policyholders.
Solid flows
The business reported £360m of cash generation in the first half of the year compared to £147m in the same period of 2016.
Phoenix thus remains on track to achieve cash generation targets of £1bn to £1.2bn by 2018 and £2.8bn in the four years to 2020.
The firm said it would increase its interim dividend by 5% to 25.1p a share.
