Phoenix Group generated £100m of cash in the four months to May, and remains confident that it can deliver all its 2012 financial targets – including cash generation of up to £600m.
This is important because the closed-life run-off specialist is carrying debt of £2.6bn and, until significant amounts of this can be repaid, there are covenants restricting dividend growth. This partly explains why the shares have underperformed – so much so that at, 511p, they are trading at a 58 per cent discount to end-2011's stated embedded value.
Management is focusing on increasing third party assets to generate more fee income and its asset management arm, Ignis, attracted net inflows of £388m. And, despite considerable volatility in investment markets, Phoenix has maintained an £1.3bn excess of regulatory capital.
