- Shares drift despite better first half results
- Sun Life deal already discounted
- Interim dividend increased by 3%
Shares in insurance group Phoenix Group Holdings (PHNX) drifted 1% lower to 675p despite the group announcing first half results which were ahead of consensus expectations.
The muted share price response may reflect the fact that the market has already factored in the benefits of the recently announced Sun Life deal with a 15.3% rise in the share price over the last month.
The group reported £950 million of cash generation in the first half of 2022, significantly ahead of the consensus estimate of £692 million.
Chief executive Andy Briggs said: ‘Phoenix has performed very strongly in the first half of the year despite the challenging macro environment.
‘We have once again delivered a record set of financial results, underpinned by the strong progress we have made across our strategic priorities.’
Phoenix Group has £4.7 billion of solvency surplus and said it would increase the interim dividend by 3% to 24.8p, in line with analysts’ forecasts.
Management now expects to hit the top end of its 2022 cash generation target of £1.3 billion-£1.4 billion, although the outlook for cash generation remains the same at £4 billion over a three-year period and £17 billion across the life of the back book.
SUN LIFE DEAL BAKED IN
Earlier this month Phoenix acquired the closed-book life insurance company Sun Life UK for £248 million.
This was Phoenix's first acquisition financed solely from existing cash resources, reflecting the surplus cash and capital available for reinvestment into growth.
The deal is expected to deliver circa £470 million of incremental long-term cash generation, with approximately 30% of this due in the first three years.
The group is targeting around £125 million of integration synergies, net of costs, from cost efficiencies and capital management actions, representing approximately half of the acquisition cost.
EXPERT VIEW
Commenting on today’s first half results, Peel Hunt analyst Andreas van Embden said: ‘A strong headline cash number during the first half of 2022 does not materially change the full year 2022 outlook, although it excludes the positive contribution of the recent Sun Life deal.’
‘The wholesale annuity market continues to accelerate and deliver organic growth opportunities alongside an active Life back-book mergers and acquisitions market’.
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