With more than half of its £248bn in assets under administration classed as closed life insurance and pension funds, it is tempting to view Phoenix Group’s (PHNX) as an ex-growth stock. Yet in 2019, there were encouraging signs that the consolidator can increase its cash returns over the long-term.
For a start, the group wrote new business which should add £475m of incremental long-term cash generation, split evenly between bulk-purchase annuity agreements and new capital-light UK products. This in turn goes a good distance to covering the £707m of cash generated from Phoenix’s back book in 2019 – a tad above the upper target range – which reflects a mixture of cash remittances and management efforts to book synergies from past acquisitions.
On that front, management remains on track to both realise £1.2bn in synergies from the Standard Life Assurance deal and to complete the £3.2bn purchase of ReAssure by the middle of 2020. In turn, that should boost the group’s long-term cash generation profile from £12bn to £19bn, of which between £800m and £900m can be expected this year.
Analysts at Peel Hunt expect cash earnings of 78.1p per share this year, reducing to 71.8p in 2021.
| Phoenix (PHNX) | |||||
| ORD PRICE: | 683.9p | MARKET VALUE: | £4.9bn | ||
| TOUCH: | 683.9-684p | 12-MONTH HIGH: | 806p | LOW: | 626p |
| DIVIDEND YIELD: | 6.8% | PE RATIO: | 79 | ||
| NET ASSET VALUE: | 453p* | SOLVENCY II RATIO: | 161% | ||
| Year to 31 Dec | Net premiums (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 0.92 | -70 | -34.2 | 46.6 |
| 2017 | 0.94 | -7 | -6.9 | 50.2 |
| 2018 | 2.16 | 259 | 66.6 | 46.0 |
| 2019 | 3.48 | 351 | 8.7 | 46.8 |
| % change | +61 | +36 | -87 | +2 |
| Ex Div: | 02-Apr | |||
| Payment: | 19-May | |||
| *Includes intangible assets of £4.0bn or 322p per share | ||||
