TIDMPHNX TIDMPHNW
RNS Number : 6567R
Phoenix Group Holdings
08 November 2011
Phoenix Group Holdings: Q3 2011 Interim Management Statement 8 November 2011
Phoenix Group delivers resilient financial and operational
performance
Phoenix Group, the UK's largest specialist closed life
consolidator, has generated GBP603 million cash from its operating
companies in the year to date. Despite difficult market conditions,
Life Company free surplus generation is consistent with a full year
result within the GBP750-850 million cash generation target range,
the IGD surplus has been maintained at GBP1.1 billion since the
half year and assets under management are broadly unchanged at
GBP68.3 billion.
Financial highlights at 30 September
-- GBP503 million Holding Companies cash receipts in nine months
to end-September 2011, plus GBP100 million transferred subsequently
(Q3 2010 GBP364 million)
-- Holding Companies closing cash and cash equivalents
strengthened to GBP691 million - more than doubled since Q3
2010
-- Life Company free surplus generation consistent with the
GBP750-850 million full year target for cash generation
-- Estimated IGD surplus sustained at GBP1.1 billion and
headroom over capital policy of GBP0.3 billion, unchanged since
half year results
-- Assets under management sustained at GBP68.3 billion (30 June 2011 GBP68.5 billion)
-- GBP1.1 billion net new third party money in Ignis (9 months
to 30 September 2010 GBP1.0 billion)
-- On track to deliver full year MCEV management actions of GBP100 million
-- Achieved early delivery of target for sub-50% gearing level by end of 2011
Operational Highlights
-- Completed migration of London Life policies to modern administration platform
-- Successful Court hearing on next stage of funds merger programme
-- Estate distribution adds 3-10% to policyholder payouts in certain funds
-- Winner of Melcrum SCM Award for Excellence in Employee Engagement
Clive Bannister, Group Chief Executive, commented:
"Although not immune to market conditions, Phoenix has a
resilient business model with predictable long-term cash flows. We
have a deep well of expertise in risk, restructuring, operational
and outsourcing management, which enables us to accelerate cash
generation. Ignis, our asset management business, was successful in
sustaining assets under management throughout a period of severe
market volatility.
"The Phoenix Way of managing closed life funds has enabled us to
generate free surplus in the Life Companies consistent with meeting
our GBP750-850 million cash target whilst sustaining our IGD
surplus at GBP1.1 billion despite the challenging external
environment."
Financial overview
Cash generation
Despite challenging market conditions, management actions
completed and in hand are maintaining free surplus within the life
companies at a level which is consistent with the Group's published
GBP750-850 million cashflow target for the full year. GBP603
million has been received by the Holding Companies in the year to
date, including GBP100 million since 30 September 2011.
-- Cash and cash equivalents in the Holding Companies have more
than doubled since 30 September 2010 to give very strong liquidity
buffers.
Holding Companies'(4) cash flows (GBP million) 9 months FY 2010 9 months
2011 2010
------------------------------------------------ --------- -------- ---------
Opening cash and cash equivalents in the
Holding Companies at 1 January 486 202 202
------------------------------------------------ --------- -------- ---------
Operating companies' cash generation
Cash receipts from Phoenix Life 485 708 339
Cash receipts from Ignis Asset Management 18 26 25
------------------------------------------------ --------- -------- ---------
Total receipts of cash 503 734 364
------------------------------------------------ --------- -------- ---------
Uses of cash
Recurring cash outflows
Operating expenses (35) (45) (26)
Pension scheme contributions (32) (38) (38)
Debt interest (79) (123) (81)
Total recurring cash outflows (146) (206) (145)
------------------------------------------------ --------- -------- ---------
Total non-recurring cash outflows (15) (79) (70)
------------------------------------------------ --------- -------- ---------
Uses of cash before debt repayment and
shareholders dividend (161) (285) (215)
------------------------------------------------ --------- -------- ---------
Debt repayment (108) (122) (22)
Shareholder dividend (29) (43) (20)
------------------------------------------------ --------- -------- ---------
Total cash outflows (298) (450) (257)
------------------------------------------------ --------- -------- ---------
Closing cash and cash equivalents in the
Holding Companies 691 486 309
------------------------------------------------ --------- -------- ---------
Management actions
In current market conditions, the Group's pipeline of management
actions provides flexibility to further accelerate cash, increase
solvency capital and enhance MCEV. GBP89 million of cash
acceleration management actions have been achieved in Q3, relating
to investment and operational de-risking. Further management
actions are in the pipeline and include additional de-risking
activities, fund restructuring and operational management.
Capital
The estimated IGD surplus and headroom over capital policy at 30
September 2011 were unchanged from 30 June at GBP1.1 billion and
GBP0.3 billion respectively, demonstrating the resilience of the
balance sheet that has been delivered over the last two years.
Assets under management
Assets under management were GBP68.3 billion at 30 September
2011 (31 December 2010 GBP69.6 billion; 30 June 2011 GBP68.5
billion). The movement was driven by the run-off of the closed life
book, almost entirely offset by net new third party money and
investment gains on fixed interest assets. Net new third party
money in Ignis over the 9 month period was GBP1.1 billion (9 months
to September 2010: GBP1.0bn).
Shareholder(5) exposure to Peripheral Eurozone sovereign and
financial institution debt
Sovereign debt exposure has been reduced from GBP161 million to
GBP47 million, reflecting reduced exposures in Italy (from GBP113
million to GBP21 million) and Spain (from GBP46 million to GBP25
million). Financial institutions exposure has also been reduced
from GBP319 million to GBP142 million, of which around GBP70
million is accounted for by the reclassification of certain
holdings from Spain to the UK to better reflect the geographical
exposure.
Operational overview
Policy migration to modern administration platform
Phoenix has now transferred over 2.2 million live policies from
legacy administration platforms to the modern administration
platform, BaNCS. In Q3, London Life policies were migrated from
four separate legacy systems, completing the migration of the
former Pearl business.
Funds merger programme
Phoenix has now commenced the Court process for the proposed
transfer to Phoenix Life Limited of all the business of NPI
Limited. This is expected to complete in early 2012.
Estate distribution
The Company continues to distribute surplus assets in line with
the "Phoenix Way" of with-profit management. This benefits
with-profit policyholders in a number of funds, including several
of the larger funds. The impact, for those funds which are able to
make estate distributions is typically to increase payouts by
between 3% and 10%.
Notes
1. Operating Companies' cash generation is a measure of cash and
cash equivalents, remitted by the Group's operating subsidiaries to
the Holding Companies.
2. Gearing is calculated as net shareholder debt as a percentage
of the sum of Group MCEV, net shareholder debt and the present
value of future profits of Ignis. Net shareholder debt is
shareholder debt (including hybrid debt) less Holding Companies
cash and cash equivalents.
3. Any references to IGD relate to the calculation for Phoenix
Life Holdings Limited, the ultimate EEA insurance parent
undertaking.
4. The cash flow analysis is presented for the UK Holding
Companies' above the operating companies and includes Phoenix Group
Holdings.
5. "Shareholder" exposure to peripheral Eurozone includes non-profit and supported with-profits.
6. Nothing in this announcement should be construed as a profit forecast.
Enquiries
Investors: Media:
Lorraine Rees Daniel Godfrey
Head of Investor Relations Director of Corporate
Communications
+44 (0) 20 7489 4456 (DD) + 44 (0) 20 7489 4517 (DD)
+44 (0) 7872 413 277 (Mob) + 44 (0) 7894 937 890 (Mob)
Further information:
A conference call for analysts and investors will take place at
8.30am (UK time) today. Dial in number is +44 (0) 20 3059 5845.
Please quote "Phoenix".
Access to the audiocast, with the facility to ask questions,
will also be available via our website www.thephoenixgroup.com A
replay will be made available on the website.
-- Financial calendar 2011:
Full year 2011 results 23 March 2012
-- The financial information contained in this announcement has
not been audited or reviewed by the Group's auditors.
Forward looking statements
This announcement in relation to Phoenix Group Holdings and its
subsidiaries (the 'Group') contains, and we may make other
statements (verbal or otherwise) containing, forward-looking
statements about the Group's current plans, goals and expectations
relating to future financial conditions, performance, results,
strategy and/or objectives.
Statements containing the words: 'believes', 'intends',
'expects', 'plans', 'seeks', 'targets', 'continues' and
'anticipates' or other words of similar meaning are
forward-looking.
Forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances that are beyond the
Group's control. For example, certain insurance risk disclosures
are dependent on the Group's choices about assumptions and models,
which by their nature are estimates. As such, actual future gains
and losses could differ materially from those that we have
estimated.
Other factors which could cause actual results to differ
materially from those estimated by forward-looking statements
include but are not limited to: domestic and global economic and
business conditions; asset prices; market related risks such as
fluctuations in interest rates and exchange rates, and the
performance of financial markets generally; the policies and
actions of governmental and/or regulatory authorities, including,
for example, new government initiatives related to the financial
crisis and the effect of the European Union's "Solvency II"
requirements on the Group's capital maintenance requirements; the
impact of inflation and deflation; market competition; changes in
assumptions in pricing and reserving for insurance business
(particularly with regard to mortality and morbidity trends, gender
pricing and lapse rates); the timing, impact and other
uncertainties of future acquisitions or combinations within
relevant industries; risks associated with arrangements with third
parties, including joint ventures; inability of reinsurers to meet
obligations or unavailability of reinsurance coverage; the impact
of changes in capital, solvency or accounting standards, and tax
and other legislation and regulations in the jurisdictions in which
members of the Group operate.
As a result, the Group's actual future financial condition,
performance and results may differ materially from the plans, goals
and expectations set out in the forward-looking statements within
this announcement. The Group undertakes no obligation to update any
of the forward-looking statements contained within this
announcement or any other forward-looking statements it may make.
Nothing in this announcement should be construed as a profit
forecast.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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