Phoenix Group’s Earnings Call Highlights Strong Growth

Phoenix Group Holdings ((GB:PHNX)) has held its Q4 earnings call. Read on for the main highlights of the call.

Phoenix Group Holdings’ recent earnings call conveyed a generally positive sentiment, highlighting robust financial performance marked by significant cash generation and profit growth. The company has upgraded its targets and increased dividend payouts, although challenges persist with leverage ratios and IFRS equity volatility due to hedging strategies.

Cash Generation Target Achieved Early

Phoenix Group has outperformed its key metric of operating cash generation (OCG), achieving its 2026 target of £1.4 billion two years ahead of schedule. This accomplishment has supported a total cash generation of £1.8 billion, leading to an upgrade of the 2024-2026 total cash generation target from £4.4 billion to £5.1 billion.

Strong Financial Performance

The group’s IFRS adjusted operating profit increased by 31% year-on-year to £825 million. This strong performance underpins a progressive and sustainable dividend policy, with a recommended 2.6% increase in the final dividend.

Growth in Pension and Savings

Phoenix’s Workplace business has delivered net inflows of £5.3 billion in 2024, marking a 13% increase from the previous year. Additionally, retail new business flows have surged by 60% year-on-year.

Expansion in Asset Management Capabilities

The company has significantly expanded its in-house asset management team, contributing to £0.5 billion in recurring management actions. This expansion has bolstered capital and cash generation.

Annuity Market Growth

Phoenix holds a 12% share in the individual annuity market and continues to innovate with new product launches, such as the Standard Life Guaranteed Fixed-term Income product.

Leverage Ratio Challenges

Despite making debt repayments, Phoenix’s leverage ratio has remained flat at 36%. The company aims to reduce this to 30% by 2026, with a reduction in Own Funds being a contributing factor.

IFRS Shareholders’ Equity Impacted by Hedging

The IFRS loss after tax was £1.1 billion, influenced by economic movements and hedging activities, with the hedging program causing accounting volatility.

Non-Operating Cash Generation Dependency

Phoenix Group relies on non-operating cash generation to fund strategic investments, highlighting a dependency on non-recurring income sources.

Forward-Looking Guidance

In the recent call, Phoenix Group showcased a strong financial performance for 2024, leading to upgrades across their financial framework. They surpassed their 2026 operating cash generation (OCG) target of £1.4 billion two years early, contributing to a total cash generation of £1.8 billion for the year. This success prompted an upgrade of their three-year cash generation target from £4.4 billion to £5.1 billion. The company also reported a solvency capital coverage ratio of 172% and maintained a 36% leverage ratio, with plans to achieve a 30% target by 2026. IFRS adjusted operating profit saw a 31% year-on-year increase to £825 million, supporting a raised 2026 profit target from £900 million to £1.1 billion. Phoenix Group also announced a 2.6% increase in the final dividend, reflecting their progressive and sustainable dividend policy. The call highlighted strategic priorities across 2025 and 2026, focusing on leveraging excess cash for deleveraging, optimizing their in-force business and balance sheet, and enhancing their operating model and culture.

In conclusion, Phoenix Group Holdings’ earnings call painted a picture of strong financial health and strategic foresight. The company has demonstrated significant cash generation and profit growth, leading to upgraded targets and increased dividends. While challenges remain, particularly with leverage ratios and IFRS equity volatility, Phoenix’s forward-looking strategies and robust performance provide a positive outlook for the future.